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Afghan bank scandal shows extent of corruption

Once again, Transparency International has ranked Afghanistan quite low on its corruption index just after a scandal came to light surrounding the country's former largest bank and high-ranking officials.

The extent of corruption in Afghanistan has become evident in the recently uncovered scandal surrounding the country's former largest bank. A recently-launched investigative inquiry has even implicated connections to President Hamid Karzai's 2009 re-election campaignand scams engineered by stockholders and employees of Kabul Bank.

Over 900 million dollars were fraudulently dispersed to over 10 individuals and seven companies in what has become the country's largest baking scandal and one of the largest bank failures worldwide; the bank collapse and government bailouts together make up around five percent of Afghanistan's total GDP.

Kabul Bank enjoyed a good reputation in the past

The investigation found that some of the money had been hidden in serving carts and food packaging and transported out of the country via the now-defunct Pamir Airways, which was owned by shareholders related to the bank. In November, 22 people appeared before a special tribunal to try those allegedly involved, including President Karzai's brother.

Customers' desperation vs. government's hope

"The Afghan people - the people who brought their money to the bank - are the ones who will suffer from this," said Suleiman in Kabul. He is one of the bank's many enraged customers. "The Kabul Bank used to have a good name. It was a trustworthy institution. But now, it is best to keep your money at home. People can hardly sleep since the scandal broke - they don't know what will happen to their savings. It is difficult enough to earn any money at all."

Despite the negative headlines, the Afghan government is optimistic. The president's spokesman, Aimal Faizi, told DW that Afghan authorities had made progress in the bank scandal:

"Both the ministry of finance and the central bank have been working to ensure that the money is safe. Both institutions are fighting to get the bank back on its feet."

Afghans are now worried they will not get their savings back

He added that the public prosecutor's office was investigating the case, and that progress had already been made. Furthermore, Kabul was fighting to get the former director of the bank, who had fled to the US, back to Afghanistan and put him on trial.

Deeply rooted corruption

But for many, this bank scandal brings to light just how deeply rooted corruption is in Afghan society. According to the Afghan NGO Integrity Watch Afghanistan, one in seven people pay bribes to authorities. The sums of the bribes can sometimes be as much as one third of the average monthly wage – which is around 35 US dollars. The organization named further traces of rampant corruption: a government-dependent justice system, rigged elections and arbitrary arrests.

Once again, Afghanistan is very low on this year's Transparency International (TI) corruption index. The index was released December 5 and ranked Afghanistan number 174 out of 176 countries and territories.

The Kabul Bank scandal was only the tip of the iceberg, according to Srirak Plipat, regional director of TI's Asia Pacific Department. "It shows that the country is in a crisis in terms of corruption. The state anti-corruption agencies are relatively weak and the growing amount of fraud is proof that the authorities cannot manage to maintain a functioning system."

"Great loss to society"

Srirak Plipat says Afghanistan is in a state of crisis

Srirak Plipat said he regretted, in particular, that the large amount of money lost meant that the Afghan people would lose out on social and economic development.

"Over 10 percent of the government's budget is invested in the Kabul Bank. The money would be much better invested in the health or education sectors. It is a great loss for Afghan society."

All efforts - even those of the international community - to curb corruption in Afghanistan have so far been in vain. Foreign aid money was merely squandered, Srirak Plipat pointed out. The anti-corruption expert suggests enforcing benchmark measures to keep the government inline. And he calls on international donors to make their flow of money into the country more transparent and to strengthen Afghanistan's anti-corruption agencies.